G20 Leaders will tomorrow send a clear signal about their commitment to combat corporate tax avoidance.

Chairman of the Group, Russian President Vladimir Putin has already made this intention clear in his August 28, 2013 Address in advance of this week’s G20 Summit of Heads of Government.

Outlining what he considers to be the accomplishments of the G20 under his leadership, he stated:

“Another major accomplishment includes the work undertaken on reforming tax regulation fighting tax evasion. The G20 Action Plan on Base Erosion and Profit Shifting developed with the support of the OECD can be by all means considered the most prominent step towards modernization and coordination of our countries’ tax policies in a hundred years.”

It is interesting to note less than a month after the G20 Meeting of Finance Ministers and Central Bank Governors endorsed the OECD Action Plan on Base Erosion and Profit Shifting (BEPS); the Plan has been recast as a G20 Action Plan without an alterations or amendments. This despite widespread concerns about the Plan from civil society and the international business community.

A crackdown on tax regimes found to have too soft an approach to multinationals deploying overseas finance subsidiaries through establishing a new international benchmark for appropriate taxation of controlled foreign companies.

New mechanisms to fast-track the introduction of OECD recommendations rapidly around the world. And a new approach to measuring the extent to which national tax coffers are being drained by multinationals artificially shifting their profits internationally to lower their tax bills.

Wider measures to combat predatory tax competition policies emerging in some financially stretched countries, risking a “race to the bottom” climate on tax. The UK’s new so-called “patent box” tax break for intellectual property companies will come under scrutiny.

A raft of treaty updates to neutralise the tax advantages of complex financial instruments, schemes and structures, including hybrid capital, interest payment deductions and over-capitalisation.

Tougher rules to block transfers of high-value and mobile “intangible” assets, such as brands and intellectual property rights, to tax havens where there is little or no associated business activity.

On-line multinationals with extensive warehouse operations in an overseas country, such as Amazon, to be required to pay local tax on any profits arising from sales in that country.

Multinationals to be forced to disclose to every tax authority a country-by-country breakdown of profits, sales, tax and other measures of economic activity such as headcount.

A requirement on multinationals to disclose the most aggressive “tax planning” structures to the authorities otherwise often relying on limited, local data that does not show the impact of transnational schemes to lower tax.

Although not yet ratified by the G20, last week China signed the OECD Convention ensuring that at the end of the Summit, President Putin can state that the G20 has accepted the OECD Convention as the exclusive means of ensuring compliance with the new global standard.

Head of South Africa’s Revenue Service and chair of the OECD Global Forum on Transparency and Exchange of Information (Global Forum), Kosie Louw, speaking following the release of 11 new reports on the adequacy of the assessed countries information exchange in practice; and two Phase 1 reports on the adequacy of the legal and regulatory framework of for transparency and exchange of information, had this to say:

“The Global Forum is applying pressure on all jurisdictions to implement the standard and co-operate effectively in tax information exchange. The publication of the ratings later this year will be a crucial moment for all those committed to fighting cross-border tax evasion”

According to information on the OECD website, the Global Forum has reviewed 98 jurisdictions of which 50 will be assigned ratings in November for the individual elements of the international standard and an overall rating of compliant, largely compliant, partially compliant or non-compliant.”

This should not come as a surprise to those of you who have been following my commentary on the recent G8and G20 meetings and the OECD reports to these groups over the past two months.

The creation of the list was mandated by the G20 at meetings of its finance ministers and central bank governors. Moreover they also made the strong recommendation that countries sign on to or express an interest in the OECD’s Model Convention on Mutual Assistance in Tax Matters which in effect binds signatories to a new standard of information exchange based on automaticity.

It will be interesting to see how the ratings of the 50 countries will be affected by their acceptance (or otherwise) of the new standard expressed through signing up to the OECD Multilateral Convention.

Highlights from the Communique adopted by the G20 Finance Ministers and Central Bank Governors at the end of their meeting held today in St. Petersburg Russia:

A crackdown on tax regimes found to have too soft an approach to multinationals deploying overseas finance subsidiaries through establishing a new international benchmark for appropriate taxation of controlled foreign companies.

New mechanisms to fast-track the introduction of OECD recommendations rapidly around the world. And a new approach to measuring the extent to which national tax coffers are being drained by multinationals artificially shifting their profits internationally to lower their tax bills.

Wider measures to combat predatory tax competition policies emerging in some financially stretched countries, risking a “race to the bottom” climate on tax. The UK’s new so-called “patent box” tax break for intellectual property companies will come under scrutiny.

A raft of treaty updates to neutralise the tax advantages of complex financial instruments, schemes and structures, including hybrid capital, interest payment deductions and over-capitalisation.

Tougher rules to block transfers of high-value and mobile “intangible” assets, such as brands and intellectual property rights, to tax havens where there is little or no associated business activity.

On-line multinationals with extensive warehouse operations in an overseas country, such as Amazon, to be required to pay local tax on any profits arising from sales in that country.

Multinationals to be forced to disclose to every tax authority a country-by-country breakdown of profits, sales, tax and other measures of economic activity such as headcount.

A requirement on multinationals to disclose the most aggressive “tax planning” structures to the authorities otherwise often relying on limited, local data that does not show the impact of transnational schemes to lower tax.

It is expected that the full slate of OECD anti-tax haven initiatives will be tabled and adopted by the G20 Heads of Government at their 2013 Summit between September 5-6.

A very good thing to have if you are a Euro Zone member in search of a bailout.

It’s especially good if you also happen to be an ‘onshore’ financial centre with a corporate tax rate of 10% – the lowest in Europe – and none to fussed about Europe’s bailout ‘strings’.

Cyprus is in a bit of a pickle.

It needs money – a lot of it- and it needs it fast. The country’s Deputy Minister for Europe estimates that it needs the equivalent of EUR1.8 billion to prop up its Popular Bank, hard hit by Greece’s implosion, though according to the Deputy Minister, the country would take up to EUR4billion ‘to be on the safe side’.

You would have thought that a Euro bailout for Cyprus would be a foregone conclusion and theirs for the asking, not only because Cyprus is part of the European Union (EU), but more importantly perhaps because on July 1st this year it assumes the Presidency of the regional bloc.

In the early days of EU-backed bailouts when Ireland got theirs, it seemed to be just the ‘tonic’ to quiet the flutters in the domestic and the international markets while adding strength and credibility to an economy tottering on the brink of collapse.

Now that the markets have built up a ‘tolerance’ to the EURO-money linctus, as illustrated by their apathetic response to news of Spain’s bailout, in the words of Cyprus’s Deputy Minister “Euro money now has negative connotations” and points not to an economy poised for quick recovery but one that is not insulated from economic and political free fall even with the bailout funds in hand.

With general elections due in February next year, the Cypriot government is not anxious to experience what happens when EU-style austerity is foisted on a country.

Cyprus has another option – Russia.

This is not the first time that the Cypriots have needed a bailout. They got one last year from Russia with no apparent conditionalities. That’s appealing to Cyprus not only because they can take the money without any interference from the Kremlin in their domestic affairs but also because Russia is the island’s lucrative ‘hinterland’ for its successful international financial services sector.

Naturally as creditor Russia would have even more incentive to guarantee the continued viability of its strategic offshore partner.

In fact Russia has already put measures in place to ensure that Cyprus earn enough to pay its pre-existing debt. Two years Russian President Medvedev signed a protocol to its 1998 tax treaty with Cyprus and confirmed that the country would be removed from its tax haven ‘blacklist maintained by Russia’s Central Bank.

The ‘blacklist’ was part of an amendment to the Russian tax code which introduced a tax exemption on the repatriation of dividends from foreign subsidiaries of Russian companies, but specifically excluded Russian subsidiaries based in the fifty-four territories and countries on its so-called ‘blacklist’.

To re-affirm their good relations, in addition to the protocol, President Medvedev also signed fourteen new agreements to enhance economic relations with Cyprus.

A Prisoner’s Dilemma

Cypriot Finance Minister Vassos Shiarly says he will exhaust all options to seek the best possible terms for his country’s economy. Others are confident that the government will ‘not wait to the last day’ to find a solution to Popular, but Moody’s Investor Service has this week cut the credit rate on Bank of Cyprus; put Popular on review for downgrade; and says that Cyprus’ third bank – Hellenic – is also due to be downgraded.

The ‘last day’ may be around the corner, but Cyprus, with all of its options, may yet face ‘Hobson’s choice’.